Should Sri Lanka de-dollarise? Beyond bananas, beaches, bases and dependent development

Tuesday, 3 May 2022 

Necessity is the mother of invention: Protests are mounting by people from all walks of life in all parts of Sri Lanka against the soaring cost of living, food and fuel shortages, blackouts, lockdowns, forced COVID injections, and the sale of national assets by the ruling dual US citizen Rajapaksa-led regime in Colombo. 

As the Sri Lankan Rupee crashes against the ‘exorbitantly privileged’ American Dollar, seemingly a precondition for an IMF bailout, the buzz in some quarters of the Colombo intelligentsia is the need to ‘de-dollarise’ and use a basket of currencies for trade, rather than de-value the Lankan rupee against the USD to beggar the people, compound the national debt, and enable Euro-American hedge funds to asset strip in this strategic island following the ‘advice’ of the IMF’s ‘economic hit men’. 

Lands and power plants have been sold off in this country perched on some of the busiest Sea Lanes of Communication (SLOC), in the Indian Ocean and world to Hedge Funds like BlackRock and Indian Front companies like Adani and Ambani. The latter’s push to take over the agriculture sector of India during COVID lockdowns was only prevented by two years of courageous protests by farmers.

The search for out of the box solutions are on now in Sri Lanka; especially as the post-World War 2 Pax Americana and its financial and security order based on the USD as the Global Reserve Currency is collapsing fast as Asia giants, China and India, along with sanctions hit-Russia, and Pakistan are pushed to design a ‘new world order’ – in their national self-interest also given huge populations and mass impoverishment as a result of two years of COVID-19 lockdowns and continuing bio-warfare. These Asian powers that share borders with Afghanistan which was occupied for many years, wreaked and left by the NATO war-machine have learned lessons.

China may buy Saudi oil in Renminbi circumventing the Petrodollar, and sanctions-hit Russia is working out a deal to sell oil and gas at discounted prices to India. Even tiny El Salvador in South America has made Bitcoin legal tender and may soon pay down IMF debt with Bitcoin. 

Sovereign Bond debt trap and COVID-19 disruption

As people die in petrol queues and a humanitarian crisis mounts with mass impoverishment at this time in Sri Lanka due to an International Sovereign Bond (ISB) debt trap and COVID-19 Digital Colonialism and supply chain disruptions, the island nation may well consider following India’s example its own self-interest and buy oil, gas, jet fuel, etc. from Russia at discounted rates in Rubles, or in exchange for tea, rather than succumb to US-EU’s latest sanctions on Russia, GSP removal threats, and the IMF’s debt trap ‘bailouts’ and debt re-structuring projects and invite India and China to help it roll over some the debt.

After all, the US has printed 9 trillion in the past two years alone as ‘COVID bailouts’ and is the Most Indebted Country on the planet, with a debt of $ 20 trillion and counting, yet its Hedge Funds are asset stripping in Asian and African countries whose economies were hit hard by the World Health Organization’s criminal COVID lockdown policy recommendations. Meanwhile, Euro-America channels more funds into the environmentally destructive NATO war machine, with the Ukrainian people as the latest victims of the global military business industrial complex and US Proxy Wars.

It is increasingly evident that there are no purely ‘economic’ (IMF-crafted), solutions to fundamentally political and geo-strategic problems in Sri Lanka or anywhere else. Sri Lanka due to its location at the centre of the IO has long been in the cross-hairs of great power rivalry that increasingly includes Over the Horizon (OTH), economic and hybrid cyber-trade war operations by external state and non-state actors: It is a fact that several big powers would like to have military bases in the strategic island. Unlike Singapore and Dubai, with which Sri Lanka is often compared negatively because of its lack of economic success, the island does ‘not’ have an American military base. 

Look east for development

Increasingly calls are being made for Sri Lanka to look East, to countries in the Association of South East Asia (ASEAN) and China, and stop following the ‘experts’ and debt-trap development ‘advice’ of the Washington Consensus (IMF, WB), and Organization for Economic Corporation and Development (OECD), Paris Club of Aid Donors that have dictated the colonial development policies that structure the island’s economy.

‘No’ country can develop without a degree of industrialisation, state-led investment in Research and Development (R&D), and transfer of technology. This is what World Systems theorists of Dependency and Under-development (Samir Amin, Andre Gunde Franke, Emmanuel Wallerstine, etc.) wrote about. 

In a nutshell, dependency theorists argue that that valuable natural resources, primary commodities and raw materials flowed from the periphery of the world system, i.e. from poor and underdeveloped states in the post-colonies of Asia, Africa and Latin America to a core of wealthy nations in the so-called First World or Euro-America. In other words, countries in the Third World or Global South pay for the enrichment of wealthy states, and continue to be dependent on them due to colonial modes of production, thinking, and exchange. So too development discourse and experts actually disabled knowledge and technology transfers. 

Samir Amin’s work focused on global structures, that underpin an international system of exploitation, both the structure of the global economy and the structural prejudice of eurocentrism. In these times when the social sciences are increasingly given to ‘methodological individualism’ and/or ‘methodological nationalism’ (the notion that individuals and nation states are the most relevant units of analysis), underpinned by Rational Choice Theory– the world system’s theorists’ attention to global structures, that underpin an international system of exploitation is much needed to understand decades of debt-trapped ‘development’ in countries such as Sri Lanka.

A post-colonial dependency culture

After putative ‘independence’ from the British in 1948 in Sri Lanka, a pliant transnational political and business elite (later Diaspora), have effectively stymied strategic development thinking, independent research and development (R & D), and technology transfer to enable industrialisation and use the island’s massive ocean and mineral resources, and leverage its geostrategic location in the Indian Ocean region for national development, also due to dependence on foreign ‘donors’ and experts by successive governments.

The current model of neo-liberal economic development since the introduction of the ‘Open economy’ reforms in 1977, may be viewed as a form of ‘colonialism by other means’. Sri Lanka’s economy services and benefits the imperial metropole core countries and like many other debt-trapped Third World countries, impoverishes the island’s people, which remain dependent on capital and markets in the West, and hence service Western needs. 

This is why Sri Lanka effectively remains a ‘Banana Republic’ as feminist political economist and academic Cynthia Enloe’s book ‘Bananas, Beeches and Bases’ has traced; manufacturing underwear for Europeans, begging for GSP handouts (that sustain economic dependence on EU markets), and running behind white tourists and ‘digital nomads.’

So-called GSP and GSP Plus ‘Trade Concession’ have actually kept the Sri Lanka business community, policymakers and politicians colonised for ‘decades’, and following the dictats of the Paris Club and Washington Consensus debt trap development, rather than enable Sri Lanka to craft independent development policies. GSP, like the Human Rights Discourse that is strategically deployed to advance Western interest in Sri Lanka, is an exemplar of how colonial development policy works through trade instruments that trap dependent developing countries.

At this time Sri Lanka should not cave in to the Euro-American sanction regimes on Russian oil and gas, and succumb to EU GSP removal threats. 

Sri Lanka’s economic development was also ‘islanded’ and stymied by 30 years of externally manipulated ‘internal conflict’ due to lack of strategic and intelligent political leadership during the Cold War period which saw the weaponisation of ethno-religious identity politics by external State and non-State actors and transnational networks, followed by the US-led Global War on Terror in the IOR. 

The latter saw mysterious ISIS claimed attacks hit sea-front luxury hotels and the tourism-dependent island economy on Easter Sunday 2019 dealing it a crippling blow. The scenario at this time is reminiscent of the multiple crisis in Lebanon last year after the blast at its strategic port the previous followed by never ending investigations that never identify the external actors involved in such attacks despite and because of foreign intelligence agencies participating in ‘investigations’!

Finally, a mindset of colonial dependency among the island’s business, financial and political elites, with spiralling political corruption has ensured the lack of a strategic national vision for post-independence economic development by succeeding governments. 

Banana republic: Service economy, aid dependency and Dutch Disease

Service economies remain colonial dependency economies, designed to service the imperial Euro-American metropole powers, unless visionary leaders are able to lead a country’s economic development and re-structure it in the Global South. 

Almost since the ‘Open economic reforms’ of 1977, the Paris Club donors and advisors along with a pliant and colonised political elite and Lankan business community solely lacking in innovation and enterprise with a few notable exceptions have turned the island’s economy into a Banana Republic Service Economy, dependent on US-EU Aid, experts and markets! 

UN SDG experts and Washington Consensus ‘advisors’ have also helped maintain a model of neo-colonial economic development, dependent on Euro-America and its corporates, albeit with help of increasingly transnational political and business elites of the island.

Sri Lanka has missed the opportunity to leverage, Transfer Technology, industrialise and value add to its valuable mineral (including Rare Earth Elements (REE) and ocean resources which are being looted by so called ‘Aid Donors’ like Germany and Suisse (Graphite, Titanium, Zircon), France, EU and Japan (Fisheries).

Lack of State-led investment in Research and Development based on a post-colonial national vision and policy to up-scale enable the country to leverage its strategic resources, along with institutional decay and corruption at key higher education and national research institutions like the Geological Survey and Mines Bureau (GSMB), National Aquatic Research Agency (NARA), Marine Environmental Protection Agency (MEPA), etc. have also hampered the country reaping the benefits of its abundant ocean and mineral resources through industrialisation, transfer of technology and value addition.

Service economies remain dependent on foreign aid, consultants and experts for Research and Development (R & D), and do not generate independent economic research institutions that critiques and or moves beyond the Euro-American neoliberal growth paradigm, and established power/knowledge hierarchies.

Research and development institutions have been rendered dependent on Western ‘donors’ and hence service foreign interests and external research interests, rather than the economic and development interests of the people of Sri Lanka. Dependence on Western donors and markets has resulted in what may be termed a form of aid-induced ‘Dutch Disease’, another symptom of under-development in a pot/colony. So too many Colombo NGOs involved in research and economic think tanks like the Institute for Policy Studies, the Center for Poverty Analysis, Verite Research, and Pathfinder Foundation remain dependent on Euro-American funding and research paradigms, unable to think outside the frame of received education in the Euro-American academy, cheerleaders of and for the IMF and Paris Club.

Going forward as a short and long-term development strategy, it is increasingly clear that the Sri Lankan State should invest in R & D in order to:

 a) use its Graphite and Rare Earth Minerals to industrialise and manufacture solar panels, batteries and Graphene Oxide (also used in mRNA gene therapies), and integrating into regional value chains rather than exporting ‘mineral sands’ (Titanium, Zircon, Ilmenite, etc.) cheap, that are not even listed as contributing to the counties foreign income!

b) Rather than have an ‘artisanal’ fishery sector the island, richly endowed with oceans resources, could have developed an export oriented fishing industry and bi-products, such as, high-end fish oil pharmaceutical manufacturing.

c) Leverage its strategic Indian Ocean location for economic development and taxing submarine Under Sea Data (UDC) Cable Companies that use Sri Lanka’s Seabed Exclusive Economic Zone (EEZ).

Sri Lanka is intrinsically a wealthy nation, given abundant water with two annual monsoon seasons, mineral rich seabed, and Mother Nature’s environmental largess, but has been rendered a ‘beggar’ nation due to fake independence, a dependent development model rooted in Euro-American corporate colonialism, foreign aid, experts and the dependency complex of its business elites and of course local political corruption in the post/colony.

Finally, as the IMF tightens its noose on Lanka’s long-suffering people with the help of the dual US citizens, Finance Minister Basil Rajapaksa and his brother President Gotabaya Rajapaksa, we may well ask why the IMF has not yet declared the United States of America with it 20 trillion debt a ‘Heavily Indebted Poor Country (HIPC) and offered it HIPC status! 

Increasingly people are challenging the double standards of the Washington Consensus and Paris Club that use their Imperialist past to print trillions of Euros and Dollars as ‘COVID Bailouts’ and asset strip in the Global South and increase inequality among nations and peoples.

Desperate times warrant out of the box solutions. At a massive opposition protest in Colombo organised by an opposition party this week on 15 March, there were calls for President Rajapaksa and his brother, the US citizen ‘Finance Minister’ to ‘go back home to Los Angeles, USA’!

 (The writer is a social and medical anthropologist with expertise in international development and political economic analysis. She was a member of the International Steering Group of the North-South Institute project: ‘Southern Perspectives on Reform of the International Aid Architecture)